RBI Notifies Revised Reserve Bank Of India (Commercial Banks – Credit Facilities) Amendment Directions, 2026

RBI by way of notification dated 30.03.2026, has notified the RBI (Commercial Banks – Credit Facilities) Amendment Directions, 2026 ("Revised CF Amendment")¹, to amend the RBI (Commercial Banks – Credit Facilities) Directions, 2025 ("CF Directions"). The key features of the Revised CF Amendment are as follows:

i. The definition of 'Acquisition Finance' has been revised from being tied to acquisition of equity shares/CCDs in a target or its holding company (leading to control) to a broader concept that focuses on acquiring 'control' in the target company itself (including via mergers/amalgamations).

ii. The definition of 'cash and cash equivalents' has been introduced to include cash, balances in demand and term deposits with the lending bank, and investments in units of overnight mutual funds (with a minimum haircut of 10 per cent).

iii. Framework for Acquisition Finance:

1. The framework has been revised from permitting finance for 'strategic' equity acquisitions in domestic or foreign companies, to permitting finance only for acquiring (or increasing stake towards) 'control' over a domestic or foreign non-financial target company, expressly subject to FEMA, with additional restrictions where the target has financial-sector subsidiaries or JVs.
2. Where control over a target results in control over multiple downstream companies, the 'potential synergy' test for strategic investment shall be applied at the consolidated group level, and it expressly prohibits extending acquisition finance for acquisition of a non-financial target company that has one or more financial entities as subsidiaries or joint ventures.
3. Scope of refinancing of the existing acquisition debt has been revised from permitted refinance of existing acquisition finance, subject to the CF Directions and stressed-asset norms, to refinancing of existing acquisition debt only after control has been fully established, and only for retiring that acquisition-finance debt (not for repaying the acquirer's own equity/contribution or any other purpose).

iv. Eligible Entities: The scope has been broadened, while being subject to more clearly defined and specific conditions - (i) direct acquisition by the acquiring company, (ii) on-lending by the acquiring company to a non-financial subsidiary in India or overseas, (iii) direct borrowing by an existing non-financial subsidiary in India or overseas 'on the strength' of the acquiring company, or (iv) a step-down SPV in India or overseas (including joint SPVs with another non-financial company) with no business other than acquisition/holding of the target, subject to the additional requirement that, where the acquirer holds less than a majority of voting rights in the SPV or subsidiary, it must still hold the single largest voting block and face no veto/override rights from any other shareholder or concert group.

v. The requirement of the acquiring company to fund the non-bank portion of the acquisition from its 'own funds' such as internal accruals or fresh equity has been revised to include only internal accruals, asset sale/redemption proceeds or fresh equity (explicitly excluding any borrowings, instruments with fixed repayment/put options, or intragroup funding sourced from borrowings).

vi. Control Acquisition Requirements: The control acquisition requirements have been revised so that control may be achieved via equity shares, compulsorily convertible preference shares or CCDs conferring control. Additionally, all debt claims of the acquirer or its group on the target must be subordinated to banks' acquisition-finance claims for the full tenor. The 12-month completion window is now computed from the date of first disbursal of acquisition finance instead of the date of execution of the acquisition agreement.

vii.The framework for Prudential ceilings for individuals has been revised to cap loans against eligible securities (other than specified government/debt instruments) at INR 1 crore per individual, at the level of the entire banking system rather than per bank. Similarly, for IPO/FPO/ESOP financing, banks can still extend loans to individuals for subscribing to shares in IPOs, FPOs or under ESOPs, but the INR 25 lakh limit is now a banking-system-wide cap.

The Revised CF Amendment shall come into force on 01.07.2026.

Footnote

1 Reserve Bank of India (Commercial Banks – Credit Facilities) Amendment Directions, 2026 (Revised).

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